In view of planned budget deficits of more than 3% in 2009, the European Commission today adopted reports under the corrective arm of the Stability and Growth Pact for Austria, Belgium, the Czech Republic, Germany, Italy, Slovakia, Slovenia, the Netherlands and Portugal. Taking due account of the economic background and all other relevant factors, the reports examine whether the deficits planned for 2009 remain close to the reference value and whether the excess is exceptional and temporary. The Commission concludes that this is not the case for any of the nine countries. Earlier this year, the Commission had already initiated excessive deficit procedures for another nine EU countries (see IP/09/274 and IP/09/752).

"A large majority of EU Member States are set to have budget deficits above 3 per cent of GDP in 2009 as a result of the economic crisis. We need to continue supporting the economy until the recovery takes hold, in line with the European Economic Recovery Plan. But now is also the moment to design coordinated exit strategies so that, when the moment is right, we can begin to roll back the soaring debt levels. The Stability and Growth Pact is sufficiently flexible to combine the fiscal stimulus in the short term with consolidation of the public finances in the medium term and sustainability in the long term, bearing in mind the costs of ageing. But it is essential to keep applying it rigorously in order to anchor expectations that the excessive deficits will be corrected in an orderly way", said Economic and Monetary Affairs Commissioner Joaquín Almunia.

The economic crisis is taking a heavy toll on public finances in the EU and elsewhere due to falling revenues and rising social expenditure on the one hand, and the discretionary measures that Member States have taken under the European Economic Recovery Plan devised by the Commission on the other.

There is a general consensus among policy-makers, from the Commission - which has been given specific budgetary surveillance tasks by the EU Treaty - to the European Council and the G20, that the budgetary stimulus was necessary to avoid a long and deep recession and that it must be maintained until a durable recovery has been secured.

But governments have also agreed at the highest level that the extraordinary support needs to be withdrawn in a coordinated manner when the time is right. At EU level, heads of government have also regularly affirmed that the Stability and Growth Pact remains the cornerstone for ensuring the sustainability of public finances and for anchoring 'exit strategies'.

Against this background and in accordance with the rules set out in Article 104 of the EU Treaty, the Commission today adopted reports initiating the excessive deficit procedure (EDP) for Austria, Belgium, the Czech Republic, Germany, Italy, Slovakia, Slovenia, the Netherlands and Portugal on the basis of projected budget deficits above 3% in 2009. Earlier this year, the Commission started the procedure for nine other EU countries 1 which had gone into excessive deficit already in 2008. Before the crisis hit in the autumn of 2008, only Hungary and the United Kingdom had been subject to the EDP.

The reports examine whether the planned deficits of the nine countries examined today remain close to the 3% ceiling set in the Treaty and whether they are exceptional and temporary in nature – in which case they would not be meet the definition of an 'excessive deficit'.

In all cases the Commission concludes that although the deficit levels are exceptional in nature, resulting primarily from a severe economic downturn or recession of an unforeseeable scale, they are neither close to the reference value nor temporary. The reports are based on fiscal projections submitted to the Commission by the countries themselves (April EDP notifications) and on the Commission's own spring forecast. The next step – the recommendations on the deadlines for the correction – will take into account the figures in the October EDP notifications and the Commission's autumn forecast.

Background: the excessive deficit procedure

The Stability and Growth Pact, composed of the relevant Treaty provisions and accompanying Regulations, requires the Commission to prepare a report whenever the actual or planned deficit of a Member State exceeds the 3% reference value. The excessive deficit procedure is regulated by Article 104 of the Treaty and is further clarified in Council Regulation (EC) No 1467/97. Revised in 2005, the Pact allows the economic situation to be taken into account when making recommendations on the timetable for the correction.

The 104(3) reports are addressed to the Economic and Financial Committee, which formulates an opinion. The Commission, taking this opinion into account, then decides whether to recommend that the Council rule on the existence of an excessive deficit (Articles 104.5 and 104.6) and set a deadline for its correction (Article 104.7).

The Commission reports in accordance with Article 104.3 of the Treaty are available at: